2 ASX dividend shares rated as buys by brokers

The ASX dividend shares in this article have been chosen by brokers as buys.

A broker counts a business is a buy if it’s valued at a good price compared to what the broker thinks it’s worth. There are some businesses that are also expected to pay a dividend which may be interesting to income investors.

Here are two to consider:

Inghams Group Ltd (ASX: ING)

Inghams is one of the largest poultry businesses in Australia. To give an idea of how big it is, Inghams saw 446.9kt of group poultry volume (up 4.2% year on year).

It’s currently rated as a buy by the broker Citi with a price target of $4.55. That implies Inghams could rise by another 20% over the next 12 months.

The broker thinks that Inghams can continue to grow in FY22. It was also noted that Inghams and Woolworths Group Ltd (ASX: WOW) have agreed in principle to an ongoing supply agreement for poultry products on broadly similar terms.

In FY22, total revenue grew 2.2%, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) went up 9.6% to $448.7 million and underlying net profit after tax (NPAT) (pre-AASB 16) grew 28.4% to $101.2 million.

The ASX dividend share managed to grow its total dividend by 17.9% to 16.5 cents per share.

Inghams is expecting to see the consumer recovery restart when vaccination rates increase and the lockdowns are lifted. Volumes are expected to show continued growth with new business across various channels.

Citi thinks Inghams is going to pay a grossed-up dividend yield of 6.8% in FY22.

Bapcor Ltd (ASX: BAP)

Bapcor is one of the largest auto parts business in the Asia Pacific region. Not only does it have a number of businesses across Australia and New Zealand like Burson and Autobarn, but it also has exposure to Asia with a growing Burson network in Thailand and a 25% stake of Tye Soon.

The ASX dividend share is currently rated as a buy by the broker Morgan Stanley, with a price target of $9.70. That suggests that Bapcor shares could rise by around 20% over the next 12 months, if the broker is right.

Morgan Stanley noted the recent update from the ASX dividend share for FY22.

It noted that FY22 has seen a solid start, with overall group revenue flat in the first quarter of FY22 compared to the first quarter of FY21. Management said that the result demonstrates the resilience and non-discretionary nature of Bapcor’s businesses. Lockdowns are impacting the business. Retail sales were down, but the specialist wholesale revenue was making up for it.

Bapcor said that it’s seeing a higher cost base at the moment, with gross profit margins lower in trade and retail due to revenue being driven by promotional and online pricing. But it’s expecting profit margins to return when lockdowns cease.

In FY22, Bapcor is aiming to deliver pro forma profit at least the level of FY21. The first half of FY22 is expect to be softer than the prior corresponding period. However, the second half of FY22 is expected to be stronger than the second half of FY1.

According to Morgan Stanley, the Bapcor share price offers a grossed-up dividend yield of 3.4% for FY22.

The post 2 ASX dividend shares rated as buys by brokers appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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